What to Look for in an Auditor: A Nonprofit’s Guide to Finding the Right Fit

Hiring an auditor is a critical decision for any nonprofit organization. The right auditor will ensure your finances are sound, help with compliance, and offer insights to improve internal controls. 

But with so many options out there, what should you look for in an auditor to ensure they meet your nonprofit's unique needs?

In this guide, I’ll walk you through the key factors to consider when selecting an auditor, plus the questions you should ask to make sure you’re choosing the right fit.

1. Experience with Nonprofits

One of the most important things to consider is the auditor’s experience with nonprofit organizations. Nonprofits face unique financial challenges, including federal and state compliance requirements, restricted funds, and grant accounting. Look for an auditor who:

• Has a proven track record of auditing nonprofit organizations.
• Is familiar with the preparation of Form 990 and other nonprofit-specific filings.
• Understands nonprofit-specific accounting principles, such as fund accounting.

The more familiar an auditor is with nonprofit accounting, the better they can ensure your organization remains compliant while identifying potential financial improvements.

2. Reputation and References

Reputation matters, especially when it comes to finding an auditor you can trust with your organization’s financials. A reputable auditor will have positive feedback from peers in the nonprofit sector. Ask for:

• References from organizations of similar size, mission, or complexity.
• Testimonials or case studies that highlight their successful audits of nonprofit organizations.

This will give you confidence in their ability to handle the scope and nuances of your nonprofit’s audit.

3. Capacity and Resources

It’s essential that the auditor has the capacity to handle your audit within your desired timeline. This includes access to additional specialists if your organization faces unique challenges (e.g., compliance audits, grants, tax-exempt issues). Consider the following:

• Can they meet your timeline and handle the scope of your audit?
• Do they have access to specialists or partners who can assist with unique challenges?

A well-resourced auditor will ensure the process is smooth and efficient, even when facing complex issues.

4. Technology and Tools

Technology is key in today’s fast-paced world, especially when it comes to auditing. A modern auditor should utilize technology for document sharing, tracking, and communication. Look for:

• Tools that streamline the audit process and improve efficiency.
• Cybersecurity measures to protect sensitive data.

A tech-savvy auditor can save you time and reduce the risks of errors or data breaches during the audit process.

5. Communication and Support

Clear, consistent communication is crucial throughout the audit process. Your auditor should be willing to educate you on the process, provide insights on areas of improvement, and keep you updated regularly. Ask:

• What is your communication style, and how often will we receive updates?
• Are you willing to offer guidance on process improvements and financial best practices?

A strong communicator can turn an audit from a stressful process into a valuable opportunity for growth.

6. Independence

Auditing standards require auditors to maintain independence and avoid conflicts of interest. Ensure that the auditor you choose complies with the ethical standards of independence required by auditing regulations. This is essential for maintaining the integrity of the audit process.

7. Cost and Transparency

Cost is always a consideration, but it’s important to look beyond just the price. A reputable auditor will offer transparent, competitive pricing with a clear breakdown of fees. Ask:

• What is your fee structure, and are there any potential additional charges?
• How do you handle unexpected complexities during the audit?

Be wary of auditors who provide ambiguous or overly high pricing without justification. You want an auditor who offers clear value for their fees.

8. Cultural Fit

Lastly, your auditor should align with your nonprofit’s mission, values, and communication style. The right cultural fit can make the audit process smoother and ensure that the auditor is truly invested in your nonprofit’s success. Consider:

• Do they understand your mission and values?
• How well do they communicate with your team?

A good cultural fit means that the auditor will be a long-term partner, supporting your organization’s financial health for years to come.

Questions to Ask Potential Auditors

Once you’ve narrowed down your choices, be sure to ask the following questions to get a deeper understanding of how the auditor will work with your nonprofit:

• About Their Experience:
• Do you have experience working with organizations in our sector?
• Can you share references from similar organizations?
  
  
• About Their Team:
• Who will be working on our audit, and what are their qualifications?
  
  
• About Their Process:
• How do you handle delays or challenges during the audit process?
  
  
• About Compliance and Standards:
• How do you stay current with nonprofit accounting and auditing standards?
  
  
• About Reporting and Communication:
• Will you provide a management letter with observations and recommendations?

Red Flags to Watch For

While finding the right auditor is important, there are some red flags that should make you reconsider a potential hire. Be cautious of:

• Lack of experience with nonprofits or organizations of your size.
• Poor communication or delayed responses.
• Unwillingness to provide references or case studies.
• Ambiguous or overly high pricing without clear justification.

These warning signs could indicate that the auditor might not be the right fit for your nonprofit.

Choosing the right auditor for your nonprofit is crucial for maintaining financial health and compliance. By focusing on the right experience, reputation, technology, and communication, you can find an auditor who will not only meet your needs but also provide valuable insights to help your organization grow.

With these tips in mind, you’ll be equipped to make a well-informed decision and set your nonprofit up for success.